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Ask Uncle Bill has a series of posts prompted by a reader who notes that much of the advice found in personal finance books and blogs is hard to follow if you’re making a lot less than the average American salary. The response is in multiple parts here, here, here, here, and here. It’s a long and interesting back-and-forth that essentially concludes with a well-meaning “Get off your duff.” I think it should be noted, however, that you really do need to follow different advice if you are in a lower-income job than if you’re making an average income. My suggestions:

1) You don’t need as much money to guarantee $15,000 a year in retirement as you do to get $100,000 a year. So if you make less, and you think you can live on that in retirement – set your targets lower.

2) The best way for you to solve your problem is not going to be to try to wring a few more pennies out of your budget. It’s going to be to earn more.

3) Remember that as people age, they tend to make more. The reader Uncle Bill refers to is atypical in that he’s still in a lower income job at age 50. It looks like health problems have been at least partially to blame. But you need to keep this principle in mind if you’re young and making minimum wage – you’ll have to work at it, but you WILL be able to find a higher paying job if you try. Focus on that (I mean seriously focus) and in a few years you should have a higher salary – then you can focus on saving.

4) If you’re not making much money, switch careers. Sound harsh? Yes, but it’s the only good advice you’re going to get. If you’re in the Peace Corps, that’s one thing – taking a lower salary for a few years to do good at a nonprofit or something isn’t going to kill you. But in the example given by Uncle Bill, a convenience store position where the only path to advancement is as manager of the same store, you’re probably going to have to go somewhere else. I’d bet that even the manager doesn’t make all that much more. Where can you go to make better money? With no education, it might mean taking a job no one else wants to do. At the extreme of this would be something like an embalmer / funeral director, a horrible job no one wants – that pays above average wages as a result. But you don’t have to go that far. In high school, I worked a summer job delivering Dr. Pepper – doesn’t sound that bad, but it was exhausting and a lot of work, causing high turnover among the drivers. The result? They made around $50,000 or so (more even than the embalmers – and above the average COMBINED household income of Americans of $44,000 or so). There are lots of jobs in this category – truck driver, prison guard, security guard, cops in bad areas, teachers in bad areas. These jobs either don’t require much in the way of credentials or will be willing to waive them just to get you to take it.

Is it awful that you have to go be a prison guard somewhere just to be able to have the money to retire? Yes, but I’m not trying to tell you what it should be like or reform the system or whatever. I’m telling you how it might have to be. You might have to make tough choices where there’s a downside either way – either stay in the low income, easy job that won’t let you retire – or go work a horrible job that will pay more.

You can also move to a different area, and that will often solve your problem entirely. If you’re living in New York City and you have a low income – again, I’m sorry to have to tell you, but your best solution is to get out and move to Wyoming or somewhere else with a low cost of living. Yes, it will cost you money. Yes, you will move from friends and family. Yes, it won’t be as fun. But you WILL improve your financial situation. You’ll be able to get a job with similar pay but won’t have to blow as much money on your expenses. If your area is in economic decline (think Michigan), then the same applies to you. You should go where the jobs are.

Other than moving or taking a bad job, your best option is to plan for a few years down the road and try to get training or education that will get you into a better job. My suggestion for lower income workers is to look at teaching, technical trades if you think you’d be good at them (plumbing, electricians, air conditioner repair in the South, auto repair, etc.), nursing, and pharmacy work. Why? Because those are all fields that have high demand. My sense is that a lot of people who get an education and end up with a lower income have this happen because they try for something that is too popular – too many people want a job there. Hairdressing, for example, or court reporting – you see ads on TV all the time for schools that will teach you how to do that. But because so many people try, a lot of them end up with a credential that won’t really get them a job. If you get a teaching certificate, you’re going to find a job SOMEWHERE – and while it won’t pay what a doctor makes, you’ll be able to retire on that salary. Being a nurse takes a little more education, but it pays more – and again, you will never lack for a job. And again, the answer isn’t pleasant – you’ll have to work yourself through school and wait several years to actually increase your salary. Sorry – but there aren’t easy answers to your problem. If there were, there wouldn’t be people in low income jobs.

4 Responses to “What Use Is Personal Finance Advice If You’re Making Minimum Wage?”

[...] What Use Is Personal Finance Advice If You’re Making Minimum Wage? Great entry that links to other discussions on the subject. This is a tough question to answer. (tags: minimumwage goals career work) [...]

In my financial planning class, I teach that your estate is like a bucket your are trying to fill. You put money in the top and it drains out through holes in the bottom. If you do not make very much, investment advice is not as important as credit and purchasing advice. You must concentrate twice as hard to make sound credit and purchasing decisions about everything. You can increase your estate (fill up your bucket) by reducing the waste (smaller holes where money drains out) due to bad financial decisions or lack of comparison shopping( insurance costs, credit costs, etc.).

Of course, you can always increase your income through education, 2nd job, etc. but no amount of money can fill a bucket that has no bottom(too many expenses or too large expenses).